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Is my broker/lender ethical?

With the complexity of the mortgage process and the large fees at stake, some loan providers seek to profit at your expense. To make sure you are being treated ethically, you should:

• Watch out for specific unethical practices
• Use our Borrower's Bill of Rights to ask direct questions
• Benchmark rates and fees using this site

Unethical Practices

Here are the most common problems people encounter:

Rate Lowballing

Unethical loan providers deliberately quote a price on the phone that is too good to be true. As the loan approaches the closing date, the low price disappears. The change is blamed on higher market rates.

Loan providers cannot legally be held to their quotes since rates fluctuate everyday. Unethical providers can hide behind a big smoke screen of "market fluctuations".

Of course, when real mortgage rates do rise, unlocked loans rates can legitimately rise.

To protect yourself from lowballing you should:

• Get the rate quote in writing.
• Discuss locking the rate ASAP. If the provider has no intention of honoring the rate, discussing a rate lock will make him/her very nervous. This is one of the reasons we generally recommend locking your rate ASAP (see our when to lock? tutorial).
• Get the lock in writing. The provider should be willing to lock your rate as soon as you have been qualified and give it to you in writing.
• Monitor rate benchmarks, such as the 10-year Treasury note and mortgage averages on sites like Loan.com. If benchmarks are not rising, generally neither should your mortgage rate.
• Educate yourself, ask a lot of questions, and follow your instincts.

Hidden Fees

Slipping Things by You

Some lenders will hurry you to finish paperwork so that you don't catch items that might work against you. Read everything. Don?t sign anything until you've read it through and understand it completely. If a mortgage lender is trying to rush you, walk away. And under no circumstances should you sign anything if there are blanks that haven't been filled in. Insist that everything be filled in first. Anything left blank should be crossed off or marked with "N/A".

Marking Up Third Party Fees

Making Your Credit Score Seem Worse Than It Is

Know your credit score and how it will affect loan terms. It's a good idea to talk to several lenders and brokers about your credit score. After talking with a few, you'll start to get a feel for the impact your score will have on a mortgage loan. Just like with mark-ups, there will be some variance in what you hear from one lender to the next, but you?ll be able to determine the range of answers that's acceptable. Avoid lenders who make your credit score seem worse than it is.

Lying About Timing

Ask your broker/lender tough questions

Asking about rates isn?t enough; you need to know about the lender's mark-up and other fees. Most third-party lenders add a margin to the market rates. That?s how they make their money. The mark-up isn't unethical, but the amount may be. If your lender isn't willing to disclose his margin or other fees, you need to find another lender. An ethical lender will not only disclose his fees, but will put them in writing. If your lender does disclose his fees, and they're not in line with other brokers, it's another potential red flag. Mark-ups will vary among brokers and lenders, but they should all be within the same range. Be wary of anyone who offers an unusually high (or low) mark-up.